Gold price (XAU/USD) has shown strong movement up to a two-week high, consolidating around the $2,360-2,365 area during the Asian session on Friday. The rise in US Treasury bond yields ahead of expected new supply next week has been a key headwind for the commodity. However, expectations for a Fed rate cut later this year following Thursday’s softer US data have failed to attract buyers to the US Dollar (USD), providing support for the non-yielding yellow metal.
The dovish outlook from the Bank of England (BoE), European Central Bank (ECB), and Swiss National Bank (SNB) has lifted bets for interest rate cuts, contributing to a sustained breakout favoring bullish traders. This outlook, along with a close above the 50-day Simple Moving Average (SMA) on Thursday, suggests that the path of least resistance for the Gold price is upward. Any corrective slide in the market is likely to be viewed as a buying opportunity, with global PMIs expected to provide fresh impetus for traders.
Disappointing US economic data released on Thursday reinforced market expectations for an imminent start of the Federal Reserve’s easing program, lifting the Gold price to a two-week high. Figures such as declining unemployment insurance applications, housing starts, building permits, and the Philadelphia Fed Manufacturing Index have kept a September rate cut on the table, lending support to the non-yielding commodity. With the possibility of another cut at the December policy meeting, investors are closely monitoring global economic cues for the gold market.
From a technical perspective, the sustained close above the 50-day SMA has triggered bullish sentiment among traders. Positive traction on the daily chart indicates a potential move towards testing the next resistance level in the $2,378-2380 region, with an eventual target of reclaiming the $2,400 mark. On the downside, the 50-day SMA serves as immediate support, followed by the $2,336-2,335 region. A break below this level may expose the $2,300 round figure and $2,285 horizontal support, leading to a retracement towards the all-time peak reached in May.
The Federal Reserve (Fed) plays a crucial role in shaping monetary policy in the US through interest rate adjustments to achieve price stability and full employment. Various policy tools, such as Quantitative Easing (QE) and Quantitative Tightening (QT), are used in extreme situations to influence economic conditions. The Fed’s eight policy meetings a year provide insights into the future direction of monetary policy, with decisions made by the Federal Open Market Committee (FOMC) based on economic assessments and data.
In conclusion, the Gold price’s consolidation at a two-week high reflects market expectations of an imminent Fed rate cut, driven by disappointing US economic data. The technical analysis suggests a bullish sentiment with potential upside targets, while global economic cues will continue to influence market sentiment. With central banks adopting dovish stances and the possibility of further rate cuts, the path of least resistance for the Gold price remains upward. Traders are advised to monitor key levels and market developments for impactful trading opportunities in the Gold market.
